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The Reserve Bank of New Zealand is expected to trim interest rate by 25 bps to 3.25% on Wednesday. A rate cut in May is fully priced; RBNZ updated forecasts, acting Governor Hawkesby’s presser eyed. The RBNZ’s policy announcements are set to ramp up the volatility around the New Zealand Dollar. The Reserve Bank of New Zealand (RBNZ) is widely expected to lower the Official Cash Rate (OCR) by 25 basis points (bps) to 3.25% from 3.50% after concluding its May monetary policy meeting on Wednesday. The decision will be announced at 02:00 GMT and will be followed by acting RBNZ Governor Christian Hawkesby’s press conference at 03:00 GMT. The New Zealand Dollar (NZD) is likely to experience intense volatility on the RBNZ policy announcements and a fresh set of quarterly economic projections. What to expect from the RBNZ interest rate decision?        With an interest rate cut fully locked in, all eyes will remain on the OCR forecasts published in the Monetary Policy Statement (MPS) for further hints on the RBNZ’s path forward on interest rates. The February MPS suggested the OCR track at 3.1% by the first quarter of 2026. Since then, US tariff developments and uncertainty over the global economic outlook have increased the downside risks to New Zealand’s growth prospects. Therefore, a downward revision to the OCR track to sub-3% wouldn’t surprise markets. Markets are currently pricing in a 60% chance that the RBNZ will drop the OCR to 2.75% by the end of the year, per Herald NZ.  In the April policy statement, the central bank noted, “as the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate.” “Future policy decisions will be determined by the outlook for inflationary pressure over the medium term,” the statement…

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Filed under: News - @ May 27, 2025 11:23 pm